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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A firm that has market power in the factor market (a wage-setter)
Monopoly long-run equilibrium
Derived Demand
Implicit costs
Monopsonist
2. The ability to set the price above the perfectly competitive level
Free-Rider Problem
Market power
Price floor
Perfect competition
3. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Comparative Advantage
Fixed inputs
Price elastic demand
Long Run
4. When firms focus their resources on production of goods for which they have comparative advantage
Economic Growth
Consumer surplus
Price Elasticity of Supply
Specialization
5. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Luxury
Normal Profit
Natural Monopoly
Perfectly elastic
6. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Price Ceiling
Private goods
Cartel
Constrained Utility Maximization
7. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Monopolistic competition
Least-Cost Rule
Average Product of Labor (APL)
Price elastic demand
8. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Price elasticity
Price inelastic demand
Scarcity
Monopolistic competition long-run equilibrium
9. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Positive externality
Income Elasticity
Surplus
Market Economy (Capitalism)
10. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Collusive oligopoly
Private goods
Profit Maximizing Resource Employment
Marginal Productivity Theory
11. A good for which higher income increases demand
Unit elastic demand
Price inelastic demand
Normal Goods
Marginal Analysis
12. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Least-Cost Rule
Constrained Utility Maximization
Scarcity
Comparative Advantage
13. A good for which higher income decreases demand
Producer surplus
Price inelastic demand
Private goods
Inferior Goods
14. Ed = 0 - no response to price change
Perfectly inelastic
Constrained Utility Maximization
Spillover costs
Least-Cost Rule
15. AFC = TFC/Q
Total Revenue Test
Average Fixed Cost (AFC)
Fixed inputs
Production function
16. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Utility Maximizing Rule
Monopolistic competition
Specialization
Demand for Labor
17. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry
Productive Efficiency
Perfectly competitive long-run equilibrium
Law of Demand
Oligopoly
18. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Private goods
Collusive oligopoly
Average Variable Cost (AVC)
Short run
19. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Law of Demand
Total Fixed Costs (TFC)
Non-collusive oligopoly
Law of Diminishing Marginal Utility
20. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Excess Capacity
Explicit costs
Normal Profit
Oligopoly
21. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Four-firm concentration ratio
Shutdown Point
Non-collusive oligopoly
Natural Monopoly
22. Ei = (%dQd good X)/(%d Income)
Variable inputs
Total Revenue
Income Elasticity
Scarcity
23. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Negative externality
Excise Tax
Demand for Labor
Marginal Revenue Product (MRP)
24. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Complementary Goods
Substitute Goods
Constrained Utility Maximization
Dead Weight Loss
25. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Constant Returns to Scale
Accounting Profit
Determinants of Labor Demand
Marginal Revenue Product (MRP)
26. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Free-Rider Problem
Derived Demand
Shortage
Price elastic demand
27. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Public goods
Excess Capacity
Fixed inputs
Allocative Efficiency
28. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Diseconomies of Scale
Determinants of Supply
Excise Tax
Normal Profit
29. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal tax rate
Marginal Product of Labor (MPL)
Total Revenue
Determinants of Labor Demand
30. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Producer surplus
Luxury
Allocative Efficiency
Positive externality
31. The difference between total revenue and total explicit costs
Constrained Utility Maximization
Price elasticity
Comparative Advantage
Accounting Profit
32. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Economic Growth
Total variable costs (TVC)
Diseconomies of Scale
Perfectly inelastic
33. Exists at the point where the quantity supplied equals the quantity demanded
Spillover benefits
Dead Weight Loss
Market Equilibrium
Private goods
34. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Price inelastic demand
Determinants of elasticity
Marginal Revenue Product (MRP)
Marginal Analysis
35. Ed = 8 - infinite change in demand to price change
Variable inputs
Shutdown Point
Long Run
Perfectly elastic
36. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Surplus
Subsidy
Excise Tax
Determinants of Demand
37. The practice of selling essentially the same good to different groups of consumers at different prices
Total variable costs (TVC)
Profit Maximizing Rule
Price discrimination
Normal Profit
38. AVC = TVC/Q
Explicit costs
Least-Cost Rule
Average Variable Cost (AVC)
Market power
39. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Utility Maximizing Rule
Absolute prices
Perfectly elastic
Law of Increasing Costs
40. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Price Ceiling
Marginal Resource Cost (MRC)
Scarcity
Monopoly long-run equilibrium
41. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Economic Profit
Law of Demand
Law of Supply
Private goods
42. ATC = TC/Q = AFC + AVC
Resources
Economic Growth
Allocative Efficiency
Average Total Cost (ATC)
43. The output where ATC is minimized and economic profit is zero
Average Fixed Cost (AFC)
Normal Goods
Law of Supply
Break-even Point
44. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Break-even Point
Price Elasticity of Supply
Comparative Advantage
45. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Economic Profit
Producer surplus
Increasing Cost Industry
Diseconomies of Scale
46. Ed = (%dQd)/(%dP). Ignore negative sign
Long Run
Variable inputs
Determinants of Labor Demand
Price elasticity
47. The rational decision maker chooses an action if MB = MC
Productive Efficiency
Market Economy (Capitalism)
Derived Demand
Marginal Analysis
48. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Marginal tax rate
Average Total Cost (ATC)
Spillover benefits
Long Run
49. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Public goods
Decreasing Cost industry
Economic Growth
Determinants of Demand
50. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Marginal tax rate
Law of Supply
Determinants of Demand
Price elasticity